Though I walk through the valley of the shadow of death I fear no evil / Ineptitude or Lies?
Though I walk through the valley of the shadow of death I fear no evil.
Unless you have been in a coma for the past year, this morning's announcement by the BS (er um the BLS) that the country lost 240,000 jobs in October and that the unemployment rate rose to 6.5% shouldn't be shocking (see report: THE EMPLOYMENT SITUATION: OCTOBER 2008).
To me, the real story here is the manipulation of the data by the BLS. We all know that its employment numbers are bogus because the positive adjustments caused by its absurd birth / death model. However, when a government organization understates job losses so significantly during the stretch run of an election where one party is losing seats in the Congress and Senate left and right and struggling to hold onto the White House one has to question if they are really that terrible at their job (in which case they should be fired) or if they were just lying to us in an attempt to influence the election (in which case they should be fired). Either way it's bad.
Conveniently after all of the ballots have been counted, the BLS tells us today that the job losses last month totaled a whopping 284,000, making them the highest since just after the September 11th terrorist attacks. Add to this the revised 127,000 job losses in August and the number of people who lost their jobs over the past two months was understated by an amazing 179,000.
I don't like being lied to and I don't like ineptitude, so either way this situation is annoying, but one has to try and look past this to see what the future will wventually bring. I am confident that the unprecedented pumping of liquidity into the system and dramatic slashing of interest rates on a global scale combined with increased government spending on infrastructure in a number of countries will be enough to keep the economy from falling into a massive depression. A bad recession, yes. Another Great Depression, no.
Will stocks fall further? Probably some, but the valuations of many companies are attractive enough at this point to justify continuing to average in little by little each month. Investors who pick stocks wisely will likely do very well by purchasing stock in the right, dividend paying companies today and holding on to them for a number of years. This too shall pass and when it does we will likely see inflation. I leave you with a quote from a recent Ken Fisher column in Forbes that sums up my current feelings on investing right now perfectly:
"Though I walk through the valley of the shadow of death I fear no evil. Seems that almost everyone else does, though. Most investors need their investments to last them a long, long time, yet they're acting like the next few months are everything. The shadow of death is an illusion. In the long term equities always do well. They will not too, even if they fall further first."